Community Loan Fund chief explains the program

The name may not give you the warm fuzzies. But if you’re looking for a place where your holiday giving can have a big impact, the New Hampshire Community Loan Fund could be a good bet. Julie Eades, president and executive director of the organization and recent recipient of the national Ned Gramlich Award for Responsible Finance, explains why.

The Ned Gramlich Award is a pretty prestigious award. Tell us what receiving it means to you.

To me it was just this fabulous national recognition for 29 years’ worth of work by the New Hampshire Community Loan Fund, making capital available to people who couldn’t get it otherwise. To be recognized by your peers is pretty special.

There were three big innovations that we were recognized for. One is the idea of helping homeowners that live in manufactured homes buy their parks as a cooperative and own their parks as a group and then get single family lending on it. The second thing that we’re known for nationally is the idea of, by the people, for the

people, getting individuals to loan to us. And then the third thing is something called “vested for growth”: it’s kind of a hybrid between debt and venture capital that fills this business lending gap. People look to us to learn how to do these things.

The New Hampshire Community Loan Fund is coming up on its 30th anniversary. Boil it down for us: What have you been able to achieve in those 30 years?

If I was a numbers person I would whip off the numbers for you. Basically we spent 30 years finding gaps in the free market where people can take control of their lives, they can accomplish something, they can be more economically self-reliant. But they don’t have access to capital. We’ve found ways to fill some of those gaps. If you thought of the banks on one end of the spectrum and government on the other, we’re kind of over right next to the banks, trying to find places where people can participate in the economy more than they would have otherwise if they didn’t have us.

You founded the loan fund when Community Development Financial Institutions were still a relatively new idea. Was it difficult initially to gain support for the concept?

Actually we were one of the first in the country. I always give Michael Swack over at the Carsey Institute at UNH credit for founding it and having the idea. I’m just the first hired gun, the first employee. The board hired me to make it operational back in 1984.

It was a new idea. The New Hampshire Community Loan Fund is founded on two beliefs. One is that the thing that keeps people from participating in the economy more isn’t just the fact that they have lower incomes. One factor is that they don’t have access to capital. The other belief is that there’s lots of capital out there that’s owned by people who would like to invest in basic human needs if they only had a way to do it. So we were created as a way to do that. Most of the capital that we have comes from individuals, churches, foundations, that lend money to us so that we can then re-lend it to individuals and community groups to do self-reliance projects.

The first lenders to us, and this has been true around the country, are the Sisters of Mercy, a Catholic order of women. Basically they want to put their money, their retirement savings, where their mission is: They’re linking their faith and their finance. They kind of set the tone because they were like, “Okay, we want you to do good things with this money, and we want you to pay us back.” And so that’s kind of the basis here, we’re going to do good things and we’re going to pay people back. We’ve never not paid people back. We’ve met all our promises to investors.

Tell us some ways you’re meeting the challenges of the present economy.

On the business front, we expanded our business lending. Our lending also succeeds because we combine lending with education. We make sure people have the skills they need to be good borrowers. So that’s part of why we’re a nonprofit organization, and part of the way we mitigate risk and improve the chances of success. Primarily we’re lending to businesses that have some kind of growth proposition. Just because we’re in a recession doesn’t mean there aren’t certain businesses that can grow right now, that can grow in New Hampshire. They’ve got an idea, whether it’s technology based or whether it’s food and farm production. There are opportunities.

Also we’re doing single-family lending in manufactured homes. And that is an area in which the mainstream credit industry didn’t serve well to begin with and then really retreated from. These are basically just small houses that are built indoors, and they’re built to housing codes and they’re very affordable. People are downsizing to these homes because they have less income but they can afford them. Our borrowers have done really well. We’ve lent $25 million to 600 homeowners in manufactured housing. And our loss rate is 1.6 percent, which compares favorably with anything else in the housing industry.

You talk a lot about filling the gaps. What else needs to happen so that we don’t have as many of these gaps, so we don’t have as many disadvantaged people?

Some of the gaps exist because these small loans are not profitable or there’s no secondary market to sell these loans to. We’re trying to create a secondary market, so some of the need for our capital may actually go away. Also if you lend to a certain group of people for long enough, you build a track record, and maybe some of the mainstream lenders will follow suit. Of course, there are market cycles too, and the capital markets are not really geared to low-income people.

And part of the problem is, people have an idea about what manufactured housing is. They have old ideas about trailers, like travel trailers. And their ideas and the systems haven’t caught up with modern manufacturing. These are modern homes built to a modern housing code.

One of the things that I love about my job is that we help people solve problems, and those problems will stay solved. When a group of homeowners in a manufactured housing park buys their park, they’re never going to have the feeling of insecurity that they’re going to get evicted because someone bought their land to build a strip mall. They’re never going to be subject to not being able to sell their house because their buyers don’t have access to fair mortgages. It’s a combination of this local investment.

What are your goals for the future of the Community Loan Fund?

We want to grow and also grow in our ability to do new things. Even though we’re a nonprofit, we raise money to help cover our costs. We fund-raise half of our budget. In order to provide this assistance, we take charitable donations toward that use. We’ve never lost any money that we’ve borrowed, but part of that is because we fund-raise.

New Hampshire’s been terrific. Twenty percent of our loan money comes from individuals. We are fairly unusual in using capital from individuals, taking donations from individuals and taking loans from individuals. We have over 300 individual lenders and about as many donors. Most other states have a lot more public money, and they also have bigger foundations. We don’t have that so we just go out and talk to the people of New Hampshire, and people respond. Now people can put their IRAs with us. If you’ve got money saved someplace, then you could put part of it with us, and you could feel like you were helping people make a really good thing happen for themselves.